In June, Chinese LNG imports strengthened, up y/y by 0.38 Mt (28%) to 1.72 Mt. This followed May, when imports were down y/y by 0.46 Mt (-29%) at 1.12 Mt. LNG imports over H1 15 are still down by around 0.29 Mt (-3%) y/y.
The conundrum of Chinese LNG imports this year continues. Chinese gas demand was up y/y by 0.3 bcm (2%) in June. This is a relatively good y/y increase, considering the weather in June was not overly supportive of cooling demand, with CDDs down by 1% y/y and 4% on the five-year average. Domestic production, however, increased by 0.48 bcm (5%) y/y in June to 9.9 bcm. Some space was made for LNG by a reduction in pipeline gas imports, which were lower y/y in June for the second month in a row by 0.29 Mt (-14%). As a result, total gas imports into China were higher y/y by only 0.09 Mt (3%). The increase in LNG at the expense of pipeline gas imports contrasts with earlier in the year, despite the Turkmen gas still coming in around spot LNG prices (i.e. 7 to 8 $/mmbtu).
To put June into context, over H1 15, gas demand in China has been moderately higher y/y, increasing by 1.9 bcm (2.1%). Gas demand from the power sector remains limited, as higher priced gas is still uncompetitive against coal in China, and coal plants remain the first choice for generation. In June, total power generation in China increased by 16.5 TWh (3.6%) y/y. Nuclear generation accounted for 5.2 TWh (49%) as capacity has expanded, and hydro generation increased by a significant 15.2 TWh (18%) on continued strong reservoir levels. This limited the call on thermal generation, which was down by 9.7 TWh (-2.8%) y/y, and is a key factor in limiting the growth in gas use over the first half of the year. Over the first half of 2015, China added 43 GW of generating plants-23 GW thermal, 5 GW hydro, and 15 GW from other sources, including nuclear.
While gas demand has grown by 2.1% over H1 15, domestic production increased by around 0.9 bcm (1.5%) over the same period. Consistent y/y growth in Q1 15 was partially offset by sizeable reductions in April and May, possibly reflecting a slowing down of general drilling activity in the country. The gap has been made up by the changes in pipeline imports and LNG-with the former dominating in Q1 15 and LNG making some better inroads in Q2 15.